Wall Street drops after U.S. election, Draghi gloom on economy

By

Published November 07, 2012

| Reuters

advertisement

NEW YORK – Stocks dropped on Wednesday as investors renewed their focus on a looming fiscal showdown in Congress after the re-election of President Barack Obama, and comments by European Central Bank President Mario Draghi fed concern about Europe's debt crisis.

The S&P energy index dropped 2 percent as companies in the sector will likely see more regulation in President Obama's second term, with less access to federal lands and water, even as the administration promotes energy independence.

With political uncertainty removed, investors attention swings to the looming "fiscal cliff" of some $600 billion in spending cuts and tax increases due to kick in next year, which could derail the U.S. economic recovery.

Investors concerns about the global economy were compounded by comments from ECB President Draghi, who said the bank expects the euro zone economy to remain weak "in the near term" and that recent data suggests the German economy, Europe's biggest, is being affected by the region's debt crisis.

In Greece, the ruling coalition hopes to overcome its own divisions and defy protesters Wednesday to push through an austerity package needed to secure aid and avert bankruptcy, with Prime Minister Antonis Samaras expected to narrowly win support for budget cuts, tax hikes and labor reforms.

"The election is over, nothing changed. It was fun, but it's kind of like a roller coaster - you just end up where you started but there was lots of excitement in the middle of it," said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank based in Scottsdale, Arizona.

"We are now squarely focused on what are you going to do about the fiscal cliff and how is Europe going to resolve this (debt crisis) problem, those two problems haven't gone away."

Healthcare stocks also fell, as President Obama's reelection rules out the possibility of a wholesale repeal of his healthcare reform law, but questions remain as to what parts of the domestic policy will be implemented. The S&P health care index lost 1.4 percent.

But Tenet Healthcare Corp was a bright spot in the sector, up 5 percent to $26.20 after it reported higher quarterly earnings on Wednesday as outpatient surgeries at its hospitals grew.

Pfizer Inc's Xeljanz treatment for rheumatoid arthritis, one of the company's potentially most lucrative experimental drugs, was approved by U.S. regulators late Tuesday and is now poised to compete with Abbott Laboratories Inc's top-selling Humira. Pfizer shares shed 0.9 percent to $24.27 while Abbott declined 1.3 percent to $64.